Faceboook Pushes for Ad Transparency – We All Should

This story from the Financial Times on Facebook’s effort to ensure that agencies do not excessively mark up the cost of their advertising outlines a significant problem, not only with online advertising but also in print. Too often, agencies take a disproportional percentage of discounts given by publications – failing to pass along that savings to customers. It is a short-sited tactic, creating a scenario where overcharged advertisers are less likely to find their advertising expenditures effective. Which is why at Mediabids.com we mark up only 8.5%, no matter how great the cost savings realized, a far cry from the 30%-40% routinely charged by agencies selling "discounted" ad space.

Facebook pushes for ad revenue transparency

By April Dembosky in San Francisco

Facebook is
pushing advertising sales agencies to be more transparent about how
they charge for their services, in an effort to protect companies who
market on the social network.

Facebook believes that by improving transparency companies will have a
clearer idea of what proportion of the money they give to agencies goes
directly on ad spending, rather than on service fees.

“There’s
a lot of snake oil out there,” said Brooke Angles, the former brand
manager for Expedia and now the chief executive of Social Click, a
creative firm.

Facebook advertising is still so new for companies, she said, that
most of them were unable to negotiate effectively with the agencies
representing them.

“The brands aren’t at a point where they’re smart enough to know the difference between the good guys and the hucksters.”

Facebook has been trying to bring more order to the social
advertising market since bolstering its roster of advertising sales
partners in August. Stepping up enforcement of its transparency rules
could boost the social network’s revenues ahead of an initial public offering.

Grady Burnett, Facebook’s vice-president of global marketing, said:
“The primary thing we care about is making sure people understand when
they’re paying for media on Facebook and when they’re paying for
something else.”

The different ways agencies charge has made it harder for
brand-owners to assess the effectiveness of their social media
advertising, according to critics.

For example, some agencies charge a direct percentage of the ad
purchase, while others charge a fee for every time a user clicks “Like”
on a fan page. Because a “Like” is such a new advertising metric with no
settled market value, a company could charge a flat fee of $2 per Like,
then spend $1 on a Facebook ad to drive the traffic that will generate
the Like, keeping a hefty 50 per cent margin for itself.

Advertisers do not like these sales agencies “making loads of
margin”, said Simon Mansell, chief executive of TBG Digital, one of
Facebook’s ad sales partners, which charges clients a 15 per cent cut of
ad spending on Facebook.

Advertisers would rather see more dollars go to Facebook, and so
would Facebook, he said. Facebook’s transparency policy could facilitate
that.

The rules require agencies to share their margins with clients up
front, and to store Facebook account information for each client
separately, so Facebook can see how much each company spends on Facebook
ads.

“You have to tell Facebook your spread,” Mr Mansell said.

Facebook has been pushing agencies to comply with the policies in the
last several months, according to agencies, after it began accepting
applications from more of them to become advertising sales partners. So
far, it has approved 25.